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Oklahoma lawsuit challenging IRS health care rule can proceed

Oklahoma lawsuit challenging IRS health care rule can proceed

A suit filed by Oklahoma's attorney general challenging an Internal Revenue Service rule that imposes a hefty fine on employers that don't offer health insurance coverage and whose employees use federal premium subsidies to buy coverage through any public insurance exchange can proceed, a federal judge ruled Monday.

Last year, Oklahoma Attorney General Scott Pruitt asked a federal court to overturn the IRS rule, contending that the Patient Protection and Affordable Care Act authorizes premium subsidies only in states that have established exchanges.

So far, 16 states and the District of Columbia have established exchanges. In the remaining states, the exchanges will be run by either the federal government alone or in partnership with the state.

In his suit, Attorney General Pruitt said the IRS rule would result in employers facing penalties under circumstances for which the health care reform law has not provided.

Under the IRS rules, if an employer does not offer coverage to at least 95% of its full-time employees and just one employee uses a federal premium subsidy to buy coverage in an exchange — state or federal — the employer is liable for a $2,000 penalty for each full-time employee, minus the first 30 employees. That penalty takes effect in 2015.

In his ruling, Judge Ronald White of the U.S. District Court for the Eastern District Court of Oklahoma said Oklahoma, as an employer, rather than as a state government, has the right to challenge the employer mandate.

“The court finds that the plaintiff has made sufficient allegations demonstrating standing to challenge the IRS rule in its own capacity as an employer,” he ruled.

Oklahoma rejected setting up an exchange.

“We're optimistic the court will recognize what states have known for months — that the IRS disregarded the law by making the large employer mandate effective in Oklahoma or in any of the 33 other states without a state health care exchange,” Mr. Pruitt said in a statement.

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